The total expense ratio (TER) for long-term funds in Europe is 153 basis points on average, but investment management firms only get to keep 42% of this.
The rest is split between custodians, who take 17%, and distributors, who take 41%, according to a study by Strategic Insight, commissioned by the European Fund and Asset Management Association (Efama).
In some cases, investment managers get less than distributors. When funds are distributed by insurance companies, as often happens in continental Europe, investment managers get just 39%, while the distributor gets an average of 46%. The figures are similar for bank-distributed funds.
For funds distributed via IFAs, which is the typical UK model, the investment manager gets a larger share of 49%. This partly reflects the greater costs, which investment managers must bear, of marketing products to a large, dispersed group of IFAs instead of one or two bank or insurance partners. But it also reflects the greater negotiating power of banks and insurers, which can insist on a larger cut.
©2011 funds europe
